Question

In: Accounting

Model constructing an income statement and balance sheet for a furniture company based on the following...

Model constructing an income statement and balance sheet for a furniture company based on the following transaction details. Please clearly show which transactions fall under the following parts of the statement:

Sales

Cost of Sales

SG&A Expenses

Interest Income

Income Expense

Loss on Sale of Non-Current Asset

Transactions

  1. Buy wood to build bookshelves- $500
  2. A recently hired team member builds the bookshelves and should be paid - $25
  3. Paid electricity bill for shop where bookshelves are made - $100
  4. Paid team member who built the bookshelves - $25
  5. Sold moving truck - $2500 (cash) (depreciation charge to date is $500; truck had an accumulated depreciation of $1000 at the time of sale)
  6. Sold 2 bookshelves for $200 each (the total cost to make the bookshelves was $75 each)
  7. Completed a subscription service from prior year - $4000
  8. A count of manufacturing inventory shows $200 of raw materials on hand, $100 of work in process and completed making $300 worth of bookshelves
  9. File cabinets depreciated - $75
  10. Paid interest on a bank loan - $1000
  11. Recorded the portion of the prepaid workshop insurance from the previous year - $50
  12. Collected interest income - $20

Opening Balances

  1. Cash - $2000
  2. Inventory stock - $1000
  3. Materials - $0
  4. Work in Process - $0
  5. Finished Goods - $0
  6. Total Inventory -
  7. Accounts Receivable - $5000
  8. PP&E - $4000
  9. Prepayments - $1000
  10. Accrued Income - $10
  11. Accounts Payable - $2000
  12. Tax Payable - $0
  13. Dividend Payable - $0
  14. Accrued Liabilities $300
  15. Bank Loan - $25000
  16. Share Capital - $10000
  17. Retained Earnings - $12,000

Solutions

Expert Solution

Answer prepared considering Income Expense as 2 separate words as no such word in accounting.

  1. Buy wood to build bookshelves- $500-- Since question is regarding furniture company, buying wood will be cost of sales
  2. A recently hired team member builds the bookshelves and should be paid - $25- It would fall under SG& A Expenses
  3. Paid electricity bill for shop where bookshelves are made - $100-It would fall under SG& A Expenses
  4. Paid team member who built the bookshelves - $25- Since expense for this transaction is already booked and this is merely a payment transaction hence will not be booked under specified heads.
  5. Sold moving truck - $2500 (cash) (depreciation charge to date is $500; truck had an accumulated depreciation of $1000 at the time of sale)- Considering accumulated depreciation includes depreciation charge to date $ 500, then it would fall under loss on sale of non current assets with $1500.
  6. Sold 2 bookshelves for $200 each (the total cost to make the bookshelves was $75 each)- It would fall under Sales with $200 and cost is already mentioned in above transactions
  7. Completed a subscription service from prior year - $4000-considering already paid, would not fall under any head, its just utilization of expenses.
  8. A count of manufacturing inventory shows $200 of raw materials on hand, $100 of work in process and completed making $300 worth of bookshelves- Its inventory in hand would not fall under any specified head.
  9. File cabinets depreciated - $75-- would fall under expenses
  10. Paid interest on a bank loan - $1000- Expense
  11. Recorded the portion of the prepaid workshop insurance from the previous year - $50- Expense
  12. Collected interest income - $20- would fall under interest income

  13. Cash - $2000-not under any specified head

  14. Inventory stock - $1000-not under any specified head

  15. Materials - $0-not under any specified head
  16. Work in Process - $0-not under any specified head
  17. Finished Goods - $0- not under any specified head
  18. Total Inventory --not under any specified head
  19. Accounts Receivable - $5000-not under any specified head
  20. PP&E - $4000-not under any specified head
  21. Prepayments - $1000-not under any specified head
  22. Accrued Income - $10- not under any specified head
  23. Accounts Payable - $2000-not under any specified head
  24. Tax Payable - $0-not under any specified head
  25. Dividend Payable - $0-not under any specified head
  26. Accrued Liabilities $300- not under any specified head
  27. Bank Loan - $25000- not under any specified head
  28. Share Capital - $10000-not under any specified head
  29. Retained Earnings - $12,000- not under any specified head

ekkarill92 answered 1 year ago
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